Muskrat Falls will stabilize electricity rates for consumers, report states

Natural Resources Minister Jerome Kennedy and Nalcor president and CEO Ed Martin speak to media after the provincial government released a report today on electricity rates it says concludes that Muskrat Falls will result in lower and more stable rates for consumers compared to the Holyrood Isolated Island option. — Photo by Keith Gosse/The Telegram

The provincial government released a report today on electricity rates it says concludes that Muskrat Falls will result in lower and more stable rates for consumers compared to the Holyrood Isolated Island option.

“In the Energy Plan, we stated that our priority is to meet current and future electricity needs with environmentally friendly, stable and competitively-priced power,” Natural Resources Minister Jerome Kennedy said in a news release.

“The hydroelectric power generated from Muskrat Falls will ensure that ratepayers receive a secure, renewable source of power at the least cost possible and stop the trend of increasing rates based on oil prices.”

The news release states:

Electricity rates between 2001 and 2011 for the average ratepayer on the Island have increased 32 per cent or approximately $45 per month, which is an annual average increase of approximately 2.8 per cent. This increase was based largely on increased oil prices.

The report illustrates that between 2011 and 2016 for the average ratepayer on the Island, rates are projected to increase by an additional 16 per cent or approximately $30 per month, an annual average increase of 3 per cent. These increases have nothing to do with the development of Muskrat Falls and are again based on a forecast increase in oil prices, and increasing electricity demand.

Muskrat Falls will result in lower and more stable rates for consumers compared to the Holyrood Isolated Island option. From 2016 to 2030 without Muskrat Falls, electricity rates for the average ratepayer are projected to increase by 38 per cent, approximately $82 per month. In the same period, with Muskrat Falls rates for the average ratepayer will increase by only 18 per cent, or approximately $38 per month.

"We understand how important electricity costs are to consumers," said Ed Martin, Nalcor president and CEO. "Our focus has been to determine the path forward that provides the lowest rates for consumers and Muskrat Falls with a link to the Island will curb the volatility and growth we see in electricity rates today and ensure our rates are stable well into the future."

The release continues:

The cost of electricity production on the Island is directly linked to electricity demand and oil prices. Muskrat Falls will reduce the province’s dependence on oil and ensure that ratepayers are not vulnerable to price volatility and uncertainty with respect to supply and demand of global oil markets.

Crude oil prices are predicted by experts to stay above $100 per barrel, as referenced in PIRA’s Forecast Methodology and Assessment of Future Oil Price Trends also released today by the provincial government. The electricity rates report illustrates that without the development of Muskrat Falls, Holyrood will have to be used more and the cost of operating it will increase with rising world oil prices. Holyrood currently generates between 15 to 25 per cent on average of the Island’s electricity annually. At peak demand, the plant burns 18,000 barrels of oil a day. In 2017, for example, the annual cost of oil to generate electricity at the Holyrood plant is projected to be $324 million without Muskrat Falls.

Natural Resources Minister Jerome Kennedy and Nalcor president and CEO Ed Martin speak to media after the provincial government released a report today on electricity rates it says concludes that Muskrat Falls will result in lower and more stable rates for consumers compared to the Holyrood Isolated Island option. — Photo by Keith Gosse/The Telegram

Stund and stunder. They don't look very happy for men who are about to make billions, off the backs of us Newfoundlanders, they look so deceptive. How did our province get in the hands of these people. Sad.

If, by STABILIZE, they mean that rates will annually go higher for the next 50 years, then I guess you could agree with their statements. Rates are actually guaranteed to go up by 7.5% a year for the next few years because of the increase they forced through in 2011. Why that amount in 5 years? In my opinion, it was to help pay for and justify their propaganda song that rates "will go up anyway". Of course they will, like everything else, but not necessarily due to oil increases. So far, oil has been flat or down since that increase but that hasn't topped them or caused a rollback. With Muskrat Falls, it is my understanding that we will see 2% annual increases for all of the 50-year period they are paying off the projects. That will amount to closer to a 200% increase over that period and, truthfully, there can be no turning back, once the project is built. We, THE PEOPLE, will be paying for it, and paying even higher rates when nobody is willing to pay for extremely expensive power from MF. The notion of conserving electricity or putting demand management programs in place does not interest them because they want expensive power to basically give away to these speculative mining ventures. Who cares if we are stuck with the bill? The business tycoons will get to grease their wallets and the party coffers of political parties who sell out to them. That, in reality is what this is all about!

I can't resist....Maurice, I have attempted to educate you regarding spill in the past but it seems to fall on deaf ears. You clearly believe whatever suits your purpose - you have it both ways to use your words. You obviously don't have any idea about how a power system is operated and yet you persist with your babble containing facts and figures which you consistently misrepresent. Did Nalcor rain on your parade sometime in the past? What is the origin of your twisted thinking?

Nalcor and the Province negotiated a clause in the Hebron Agreement that it could take physical crude oil instead of 4.9% contribution of net sales. The Province owns crude oil. The Province hosts an oil refinery. A standard practice around the world is for refineries to be paid a through-put agreement to run crude oil for a third party. Hypothetically, Nalcor could pay North Atlantic to run OUR crude oil (or trade) and provide No2 Oil for Holyrood and sell the other products (gasoline, diesel, asphalt) on our behalf. In doing so, WE control the Holyrood fuel costs, do not add $12billion in debt to our ledger, and stabilize electricity rates.
It is ridiculous to contemplate that the most expensive hydroelectric project in the world is our only option.

This does not change the value of the oil, and what it costs. There is always an opportunity cost with an item. ie. The value you get out of using it vs. the value of not having the item (having sold the oil for cash).
Exactly why do people think that with inflation, population increases, and development of india/china that oil prices will stay stable or go down?
Where do you think more costs will be associated, inflation pressures on staff costs in NL and maintenance in muskrat falls, or inflation costs for staff + oil production facilities like hebron and the next mega oil projects around the world? Which will be more capital intensive? If it is more expensive to pull the black stuff out of the ground (and our oil is declining in production), why would we want to stay tied to it?

Maurice E. Adams

November 06, 2012 - 14:22

At first Nalcor said that increased Holyrood use would address Vale's expected increase in demand. .... However, Vale only accounts for less than 4.5% of the island's existing installed NET capacity of 1,958 MW --- about 1/4th of which went UNUSED last year..... Then when it was reported that Nalcor spilled 694 GWh of energy from its existing island hydro sites last year (an amount almost equivalent to Vale's yearly needs and Holyrood's production last year), Nalcor explained that away to the PUB by saying that they expected to continue spilling until Vale's demand comes on stream to supply the island's existing deficiency in demand. ..... So which is it? Will Vale's demand be met by increased costs at Holyrood? Or will Vale's needs be met through using the island's existing UNUSED capacity and expected spillage? Seems, Nalcor is very good at having it both ways --- whichever meets the needs of the moment.

They can't tell you the rate unitl they know how cheap the mining companies will get power

Tim Jamison

November 06, 2012 - 14:16

Another excellent option for bankrupting Nalcor. You naysayers are just full of great ideas

Maurice E. Adams

November 06, 2012 - 13:40

The premier recently said oil prices are expected to remain around $100 per barrel for the next 10 years........ How then can rising oil prices account for a forecast annual 3% increase in rates over the next 5 year? .... For the last several years Holyrood has provided only abut 10-12% of the island energy. ........... Over the last several years Holyrood operated on average AT CAPACITY for about 1 day each year ----- and last year --- not at all...... $324 million is a "projected" cost ---- a projected cost that is DEFENSIBLE only through intent or design.

HBG

Expert Bloggers

Quick question - 03/31/2015

A Corner Brook woman was upset recently when she had her seal skin purse confiscated by customs officials when entering the United States — she was unaware of a U.S. ban on seal product entering that country. Are you aware of the ban?